COURT FILE NO.: 7645/16 DATE: 20160915

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN Respondent – and – TREVOR WILLIAM ZACHARY Applicant

Counsel: David Kirk, for the Respondent Bruce Willson and Andrew Furgiuele, for the Applicant

HEARD: August 22, 2016

REASONS ON APPLICATION FOR CERTIORARI

A.D. KURKE J.

Overview

[1] Following a preliminary inquiry, on February 1, 2016 the Applicant was committed to trial, and is charged on an 18-Count Indictment. He applies to quash Count 2 on that Indictment, a charge of fraud, that he did “by deceit, falsehood or by other fraudulent means defraud the Corporation of the City of Sault Ste. Marie of revenues at recreational facilities…in a sum exceeding $5,000.00”.

[2] The Applicant alleges that the learned preliminary inquiry judge (“the judge”) exceeded her jurisdiction by:

1. Committing the Applicant to trial in the absence of evidence that the Applicant engaged in deceit, falsehood, or any other fraudulent means in booking ice time for himself at reduced rates;
2. Failing to test the evidence against the essential elements of fraud; and
3. Failing to consider all of the evidence with respect to whether the Crown could meet its burden with respect to the elements of fraud.

[3] It is the Applicant’s position that if he succeeds with respect to the first ground, Count 2 on the Indictment must be quashed. If he fails on the first ground, but succeeds on either of the others, Count 2 must be ordered back to the judge to perform an appropriate analysis, and consider afresh whether there should be committal.

Facts relating to Count 2

[4] The Applicant was hired in 2006 by the City of Sault Ste. Marie (“the City”) as its Marketing and Events Coordinator. In his employment, he was responsible for dealing with promoters and coordinating events and special events at the Essar Centre. He also was responsible for booking ice time for the Essar Centre and for other city-controlled rinks. Ice rental generates significant revenue for the City.

[5] The Applicant was assisted in booking ice time by Jennifer Arbour, the Events Assistant. She was primarily responsible for scheduling bookings into the “MaxIce” software system, and invoicing renters. On various screens and sub-screens, booked entries showed the person renting ice time, the number of hours booked, the amount charged per hour, and the status of the renter’s account. Ms. Arbour had access to the system, as did the Applicant, and his superiors: Norman Fera, the Manager of Community Centres, and Nick Apostle, the Commissioner of Community Services. Another witness at the preliminary inquiry with MaxIce access was Jacqueline Mosley, the Business Administration Coordinator, primarily responsible for accounts receivable. Anyone with access could examine the data that was entered, if they were minded to do so.

[6] There was evidence that City Council set rink rates every year for various categories of users, including Youth, Adult, and Youth Tournament rates. There was evidence that city employees were not allowed reduced rates, and that the Applicant was specifically advised on at least one occasion that he had to charge the rate set by Council. That said, the MaxIce system permitted those using it to enter rates at variance with rates set by City Council. Free ice time could be given to charities or as a promotion, on arrangement with the Applicant or Mr. Fera.

[7] This was also true about new tournaments. Mr. Apostle testified that “the Tournament”, an annual tournament organized by the Applicant, should have been charged the Adult rate, except for its initial year, 2005, prior to the Applicant’s employment with the City. In that year, the Applicant may only have been charged the youth rate, as new tournaments could be charged a lower rate, to allow them a better chance of success and future repetition. However, there was no indication that in later years Mr. Apostle told the Applicant that the rate should be increased.

[8] Count 2 on the Indictment incorporates ice discounts allegedly awarded to himself by the Applicant in two categories. As the organizer of “The Tournament”, the Applicant booked ice and for years charged himself rates below the Adult rate – generally at the youth tournament rate, a start-up rate. He also regularly booked free ice for himself or for groups he took part in as coach or player or organizer apart from The Tournament, setting his rate at $0. Over the term of his employment at the City, the Applicant booked himself some 170 hours of free ice time. As a result of the Applicant’s $0 bookings or reduced-rate bookings, the City earned tens of thousands of dollars less revenue than it would have had the Applicant paid the appropriate rates.

[9] Ms. Arbour was often responsible for entering bookings for the Applicant. The Community Services department held weekly meetings at which the Applicant, Mr. Fera, and Mr. Apostle all attended. Bookings at arenas were a regular topic of discussion. MaxIce entries were projected on a screen for analysis of booking patterns and gaps, with an eye towards maximizing arena use. Although the renter’s identity was visible on the screen, the rate charged was not, although it was easily accessible. Mr. Apostle testified that he was aware of the Applicant’s bookings, but not of the rate charged. He had occasion once to speak to the Applicant about the appearance of preferential treatment in his booking ice time for himself as a city employee, but was assured that the ice time booked by the Applicant was not in demand by the public.

[10] Ms. Arbour booked ice time for herself for free, after the Applicant told her that she could do so if the ice was open and was not going to be rented. When Mr. Bruzas, the City accountant, began investigating the Applicant’s financial dealings in his position, and specifically his ice time bookings, Ms. Arbour panicked, and attempted to delete records of her own free bookings. She suffered no repercussions for this conduct, and was not herself charged with any offence.

[11] There was some controversy at the argument of this Application about the interpretation of Ms. Mosley’s evidence concerning the generation of records of non-payment as accounts receivable. It was argued by the Applicant from that evidence that $0 invoices, such as those that would be generated by the Applicant’s bookings, turned up as accounts receivable, and that therefore Ms. Mosley, and Mr. Fera, would have been aware of the Applicant’s $0 bookings. In fact, Ms. Mosley’s evidence appeared clear that unpaid invoices appeared as receivables, leading to the sanctioning of renters who did not pay. However, she also testified that $0 bookings generated no invoices. Accordingly, there is no reason to think that the Applicant’s $0 bookings would turn up as receivables.

[12] It was the evidence of Mr. Apostle and Mr. Fera that they trusted the Applicant and enjoyed working with him. They only became aware of the Applicant’s $0 or reduced-rate bookings shortly before his termination and the commencement of criminal proceedings.

[13] The preliminary inquiry into the Applicant’s charges took place over 25 days between January and December 2015. The preliminary inquiry justice provided Reasons for Judgment on February 1, 2016.

The legal framework

The test for Committal

[14] A preliminary inquiry judge must commit an accused to stand trial if there is sufficient evidence upon which a reasonable and properly instructed jury could convict. If there is sufficient direct evidence on all of the essential elements of the offence, the judge must commit to trial. Where the evidence is circumstantial, the judge is to engage in a limited weighing of the evidence, to determine whether it is reasonably capable of supporting inferences of guilt: R. v. Arcuri, 2001 SCC 54, [2001] 2 S.C.R. 828, at paras. 21-32.

[15] In this context, if competing inferences are available to the preliminary inquiry judge, it is not part of her task to weigh them and choose among them, or assess credibility and reliability. So long as one or more of the available inferences in the field of factual inferences supports guilt, a committal must follow: R. v. Kamermans, 2016 ONCA 117, [2016] O.J. No. 685 (C.A.), at para. 15; R. v. Cinous, 2002 SCC 29, [2002] S.C.J. No. 28, at para. 91.

[16] In review of the decision to commit, the reviewing justice may only act on jurisdictional error: R. v. Kamermans, at para. 13; R. v. Russell, 2001 SCC 53, [2001] S.C.J. No. 53, at para. 28. The reviewing justice may not substitute his or her own view for the view of the preliminary inquiry judge, and should defer to the judge’s determinations about the sufficiency of evidence: R. v. Deschamplain, 2004 SCC 76, [2004] S.C.J. No. 73, at para. 23; Russell, at para. 19. The scope of review on sufficiency is to determine whether there is even a scintilla of evidence on each element of the offence. Committal of an accused in the entire absence of evidence on an essential element of an offence amounts to jurisdictional error: Re Skogman and The Queen, (1984), 13 C.C.C. (3d) 161 (S.C.C.), at 170-171.

[17] It is also jurisdictional error for the preliminary inquiry judge to fail to test the evidence adduced at the preliminary inquiry against the essential elements of the offence charged: R. v. Kamermans, at paras. 14, 16; Deschamplain, at para. 18. Nevertheless, “an exhaustive examination of all of the evidence is not expected”, and mere silence alone in the reasons of the preliminary inquiry judge may not suffice to justify intervention on review: Deschamplain, at paras. 21, 24. A preliminary inquiry judge need not render extensive reasons, but must demonstrate that she has considered all of the evidence: Deschamplain, at para. 34.

Fraud

[18] Section 380(1)(a) of the Criminal Code of Canada, R.S.C. 1985, c. C-46, defines fraud over $5,000 as follows:

380. (1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service,

(a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollar[.]

[19] The requirements for establishing the actus reus and mens rea of fraud have been considered extensively by the Supreme Court of Canada in R. v. Theroux, [1993] 2 S.C.R. 5. In the companion case of R. v. Zlatic, [1993] S.C.J. No. 43, at paras. 26-27, McLachlin J. (as she then was) concisely summarized the requirements this way:

26 The elements of the offence of fraud are discussed in a general fashion in R. v. Théroux, [1993] 2 S.C.R. 5, released simultaneously. For the purposes of this case, it suffices to state that the actus reus of fraud will be established by proof of:

1. the prohibited act, be it an act of deceit, a falsehood or some other fraudulent means; and
2. deprivation caused by the prohibited act, which may consist in actual loss or the placing of the victim's pecuniary interests at risk.

Correspondingly, the mens rea of fraud is established by proof of:

1. subjective knowledge of the prohibited act; and
2. subjective knowledge that the prohibited act could have as a consequence the deprivation of another (which deprivation may consist in knowledge that the victim's pecuniary interests are put at risk).

27 Where the conduct and knowledge required by these definitions are established, the accused is guilty whether he actually intended the prohibited consequence or was reckless as to whether it would occur.

[20] Accordingly, the actus reus of criminal fraud requires evidence of a dishonest act, established by proof of deceit, falsehood, or other fraudulent means, and a corresponding deprivation. Likewise, with respect to mens rea, the evidence must demonstrate the accused’s awareness that he or she was undertaking a prohibited act that would cause deprivation to another, or the risk of that deprivation.

[21] The key elements in all of this are dishonesty and deprivation. As stated by Dickson J. (as he then was) in R. v. Olan, [1978] S.C.J. No. 57 (QL), at 6:

Courts, for good reason, have been loath to attempt anything in the nature of an exhaustive definition of "defraud" but one may safely say, upon the authorities, that two elements are essential, "dishonesty" and "deprivation". To succeed, the Crown must establish dishonest deprivation.

[22] In Olan, the Supreme Court offered a consideration of what constituted the third head of fraudulent conduct in the Criminal Code definition of fraud, “other fraudulent means”. In R. v. Zlatic, the Court put beyond question that “other fraudulent means” was a separate category from those of “deceit” and “falsehood”. Common to all three conceptions of the act in issue is dishonesty, tested on the reasonable person standard. While the passage is lengthy, it is worth considering the treatment of McLachlin J. (as she then was), at paras. 31-32 of Zlatic:

31 In Olan …, Dickson J. (as he then was) had the following to say about the phrase "other fraudulent means"…:

... proof of deceit is not essential to support a conviction [for fraud]... . The words 'other fraudulent means' in s. 338(1) [now s. 380(1)] include means which are not in the nature of a falsehood or a deceit; they encompass all other means which can properly be stigmatized as dishonest.

Most frauds continue to involve either deceit or falsehood. As is pointed out in Théroux, proof of deceit or falsehood is sufficient to establish the actus reus of fraud; no further proof of dishonest action is needed. However, the third category of "other fraudulent means" has been used to support convictions in a number of situations where deceit or falsehood cannot be shown. These situations include, to date, the use of corporate funds for personal purposes, non-disclosure of important facts, exploiting the weakness of another, unauthorized diversion of funds, and unauthorized arrogation of funds or property: [citations omitted].

32 The fundamental question in determining the actus reus of fraud within the third head of the offence of fraud is whether the means to the alleged fraud can properly be stigmatized as dishonest: Olan, supra. In determining this, one applies a standard of the reasonable person. Would the reasonable person stigmatize what was done as dishonest? Dishonesty is, of course, difficult to define with precision. It does, however, connote an underhanded design which has the effect, or which engenders the risk, of depriving others of what is theirs. J. D. Ewart, in his Criminal Fraud (1986), defines dishonest conduct as that "which ordinary, decent people would feel was discreditable as being clearly at variance with straightforward or honourable dealings" (p. 99). Negligence does not suffice. Nor does taking advantage of an opportunity to someone else's detriment, where that taking has not been occasioned by unscrupulous conduct, regardless of whether such conduct was wilful or reckless. The dishonesty of "other fraudulent means" has, at its heart, the wrongful use of something in which another person has an interest, in such a manner that this other's interest is extinguished or put at risk. A use is "wrongful" in this context if it constitutes conduct which reasonable decent persons would consider dishonest and unscrupulous.

[23] While deceit and falsehood may be the categories of conduct generally involved in the commission of fraud, it is clear that the offence may be committed even where those elements are lacking: “proof of deceit is not essential”. The category “other fraudulent means”, captures conduct that, without necessarily involving deceit or falsehood, would be stigmatized by ordinary, decent people as dishonest or discreditable. Thus, “other fraudulent means” can include such conduct as the use of corporate resources for personal purposes, unauthorized diversion of funds, and unauthorized arrogation of funds or property: R. v. Lauer, [2011] P.E.I.J. No. 9 (C.A.), at para. 83.

[24] Deprivation does not require proof of actual loss. Rather, it is enough if evidence is advanced that the accused person put the economic interests of the victim at risk. In such circumstances, the potential for loss will suffice. Thus, in Olan (QL), at 6:

The element of deprivation is satisfied on proof of detriment, prejudice, or risk of prejudice to the economic interests of the victim. It is not essential that there be actual economic loss as the outcome of the fraud.

Analysis

Applicant’s first ground

[25] The Applicant complains (Notice of Application, Ground 2) that the preliminary inquiry judge erred in committing the Applicant to trial “in the absence of any evidence supporting an inference that several of the expenses that were alleged to form part of this fraud were claimed as a result of deceit or caused deprivation”. In his Factum, paragraph 1, the Applicant puts it this way: “there was no evidence the Applicant engaged in deceit, falsehood, or any other fraudulent means in booking the ice time for himself or others at reduced rates.”

[26] In furtherance of his argument, the Applicant explains that he did nothing secretly, and attempted to conceal nothing, in his ice time bookings:

a. The Applicant booked ice for himself and organizations that he was with under his own name; b. The variously reduced or $0 rates charged to himself by the Applicant were also present on the MaxIce system, and available for anyone with access to see; c. The Applicant generally had Ms. Arbour book his personal ice time at the $0 rate. He did not try to hide his bookings from subordinates; d. The Applicant’s supervisors Mr. Fera and Mr. Apostle had access to the MaxIce system, and could have checked the Applicant’s rates charged at any time; e. At weekly management meetings, ice bookings were discussed, and the rates charged for bookings were available to be viewed by anyone who cared to look; f. On one reading of Ms. Mosley’s evidence, the Applicant’s $0 bookings would potentially present as accounts receivable for her and therefore Mr. Fera and Mr. Apostle to see.

[27] In such circumstances, goes the argument, where the Applicant has been completely open in his dealings, and has sought to conceal nothing, there can be no deceit or falsehood, and therefore the actus at least of fraud has not been made out by the Crown. The Applicant contrasts his situation with that of Ms. Arbour, who booked free ice time for herself, and then in a panic sought to conceal the evidence of that fact by obliterating it on MaxIce. That act of concealment on Ms. Arbour’s part would render her liable for fraud, while the Applicant, who sought to conceal nothing, must be discharged.

[28] In support of this proposition, the Applicant refers to the endorsement of the Ontario Court of Appeal in R. v. Bolsby, [1996] O.J. No. 247. In that case, the trial judge had convicted the appellant of fraud for having put higher amounts on her paycheques for her employer’s signature than the employer in his testimony claimed had been agreed upon between the two. The Court found that the trial judge had erred in her approach to evidence of the appellant’s good character and the test in R. v. W.(D.) [(1991), 63 C.C.C. (3d) 397 (S.C.C.)], and allowed the appeal. An acquittal was entered after the Court noted “no evidence of deceit or falsehood. All of the appellant’s actions were open and consistent only with the long friendship and working relationship between [the appellant and her employer].”

[29] With respect, this decision is of limited assistance to the Applicant. It is an endorsement, and is abbreviated to a degree that the full tenor of the facts is obscured. It is also difficult to deduce from the facts whether the decision hinges on a peculiarity in the drafting of the indictment in the case; while the Court adverts to the absence of evidence of deceit or falsehood, it comments not at all on “other fraudulent means”. In addition, the facts of the case speak to a close working relationship over numerous years between two people, and not, as in the circumstances of this case, between an employee and the City that employed him.

[30] The difficulty with the Applicant’s position lies in this: it attempts to consolidate “other fraudulent means” into deceit and falsehood, when “other fraudulent means” has been confirmed as an independent category of actus reus by the Supreme Court of Canada. It is clear on the facts of Count 2 on the Indictment that the alleged conduct falls into the category of “other fraudulent means”, and falls to be analyzed under that heading, at least at this stage of proceedings.

[31] That this must be the case is only highlighted by the Applicant’s position in argument contrasting the situations of Ms. Arbour and the Applicant. On the Applicant’s argument, Ms. Arbour’s panicked attempt to erase free bookings recommended to her by the Applicant would involve her in criminal consequences, while the much more significant conduct of the Applicant could attract no criminal sanction, because there was no attempt at concealment. On his argument, the Applicant’s conduct represents at worst an ethical or a civil wrong only. The “reasonable decent” people adverted to in Zlatic might be troubled by this disparity.

[32] Concerning “other fraudulent means”, the evidence adduced at the preliminary inquiry included the following:

a. The Applicant was in charge of booking ice time for the City; b. Ice time rental was a significant source of revenue for the City; c. The Applicant had the ability to book ice time himself or through a subordinate whom he could direct to make his bookings; d. City Council every year sets the rates at which ice time is booked. The only reasonable inference on the evidence is that the Applicant knew these rates; e. City employees are not entitled to free ice, or, generally, ice at a reduced rate from what was set by Council. This had been made clear to the Applicant; f. The Applicant was aware that Mr. Apostle was concerned about the appearance of a conflict of interest in the Applicant’s booking himself ice time as a city employee. A reasonable inference is that the Applicant knew that charging himself reduced rates would not be approved of by his superiors if they were aware of it; g. Indeed, no deviation is permitted from the set rates, except in narrow circumstances that did not apply to the Applicant after 2005, the first year of the Tournament; h. Over the course of years, the Applicant repeatedly booked himself ice for $0 or at a significantly reduced rate; i. The Applicant’s supervisors were not aware that he was not paying the correct rate for ice; j. The Applicant’s supervisors trusted him; k. There was evidence on the preliminary inquiry that people who used ice that had been booked by the Applicant at a rate of $0 paid him money – money that would have gone to the City if the Applicant had not booked himself free ice time.

[33] This evidence was sufficient to satisfy the analysis for “other fraudulent means”. An objective observer could conclude on this evidence that the Applicant took advantage of his position with the City to make personal use of City assets, its arenas and ice time, without properly paying for that use. That could be objectively dishonest. That conduct deprived the City of revenue, or put at risk its ability to generate revenue from other potential renters of the Applicant’s ice time who would actually have been charged City-set rates. That could be deprivation. In his position, the Applicant knew the proper rates, and that he should not be discounting the cost of ice rental for himself, a city employee, and that ice rental was a source of revenue for the City. That could suffice for the mental element.

[34] In such circumstances, actus reus and mens rea were made out for the purpose of committal. The Applicant’s first ground must fail.

Applicant’s second and third grounds

[35] On the Applicant’s second and third grounds, it has been submitted that the judge lost jurisdiction by failing to test the evidence on the preliminary inquiry against the essential elements of fraud, and by failing to consider the whole of the evidence relevant to the offence. The argument with respect to these grounds is related. In essence, the Applicant argues that the judge did not consider the evidence that told against any effort on the Applicant’s part to conceal his ice time booking rates, or apply it to the elements of fraud. The fact that the Applicant made no effort to conceal his conduct negatives deceit or falsehood, and if the judge had considered the body of evidence relating to this aspect of the facts, she may not have been satisfied about the actus reus.

[36] The Applicant points to paragraph 59 of the judge’s Reasons of February 1, 2016, and asserts that her conclusions demonstrate no analysis, but simply stand as conclusory statements. Paragraph 59 reads as follows:

[59] In my assessment there is evidence upon which a jury could conclude that the defendant defrauded the City of Sault Ste. Marie by using the ice for free or below cost. The evidence does not support the suggestion [the Applicant] was aware of [or] ever told that the “The Tournament” was to start paying the adult rate. The youth rate was the appropriate rate. Anything else, however, was not.

[37] The Respondent argues that paragraph 59 cannot be looked at in isolation, but must be read in the context of the entire judgment. The judge considered the law related to criminal fraud and its elements in paragraphs 16 to 21 of her Reasons. In particular, in paragraph 20, the judge referred to the Theroux/Zlatic framework, which focuses on the prohibited act occasioned by deceit, falsehood, or other fraudulent means; the deprivation that results; and the requisite mental state.

[38] The judge discussed background facts about the Applicant and his position in the City hierarchy at paragraphs 3 to 4, and summarized and assessed the facts that relate specifically to Count 2 on the Indictment at paragraphs 53 to 58 of the Reasons, under the heading “Ice Time”, and just prior to paragraph 59.

[39] In her paragraph 59, the judge’s analysis reflected an assessment of the elements of fraud by considering the prohibited act in conjunction with the resulting deprivation: “a jury could conclude that the defendant defrauded the City of Sault Ste. Marie by using the ice for free or below cost”. The judge then continued on to find the requisite mental state, which involved the Applicant’s knowledge that he was not paying enough for ice time. The judge was of the view that there was evidence to show that the Applicant knew that he should at least have been paying the youth rate with respect to the Tournament.

[40] In the circumstances of Count 2 on the Indictment, as I have considered above, deceit and falsehood are not the categories of actus reus under which the Crown’s evidence at the preliminary inquiry stood to be analyzed. The ice time allegation evidence involved the heading “other fraudulent means”. In her paragraphs 3 to 4, and 53 to 58, the judge considered generally the factors I have included above in determining that there was evidence on the preliminary inquiry sufficient to establish “other fraudulent means”. The judge did not state that she assessed the evidence specifically with respect to the heading “other fraudulent means”, but her discussion and analysis point clearly in that direction.

[41] Although the judge highlighted no evidence that told against concealment of his conduct by the Applicant, “proof of deceit is not essential”. Relevance and materiality apply on preliminary inquiries as they do on trials, and the judge was not required to demonstrate her knowledge of evidence that was not relevant to her proper assessment of the essential legal elements of the charge at issue. While such evidence might further some defence at trial, it is not directly relevant to “other fraudulent means”.

[42] In the circumstances of Count 2 on the Indictment, the fact that the judge is silent about evidence of lack of concealment is neither an analytical lapse, nor proof that the judge did not consider all of the relevant evidence on the preliminary inquiry before committing the Applicant to his trial. The Applicant’s second and third grounds fail.

Conclusion

[43] The judge committed no jurisdictional error with respect to the charge that now stands at Count 2 on the Indictment.

[44] The Application is dismissed.

A.D. KURKE J. Released: September 15, 2016